Nasdaq and NYSE are the leading stock exchanges on the globe, offering a podium for exchanging securities. While sharing the similarities is the considerable purpose and size, to various markets. Understanding the differences between the New York Stock Exchange and Nasdaq can help you know how the stock market exchange works.

What is the Difference Between Nasdaq and Nyse?

The major difference between the New York Stock Exchange and Nasdaq is their finance markets because Nasdaq is a dealer’s market while NYSE is an auction derivative market that permits individuals to manage between each other on an auction basis.

Nasdaq vs NYSE:

• NYSE is an auction market, while NASDAQ is a dealer market.
• NYSE uses both people and technology as a hybrid trading model, while NASDAQ is an entirely electronic exchange.
• NYSE offers one Designated Market Maker (DMM) per stock while NASDAQ offers an average of 14 market makers per stock.

Additional differences contain the location of the transactions, how traffic is organized, the types of organizations registered, etc. The below section will help you to know more deeply.

NASDAQ

•       Market Type – Dealers Market
•       Founded – 1971
•       Capitalization Market – $11 Trillion
•       Transactions of Locations – New York City, NY, and Mahwah, NJ
•       Volatility – Stocks Often More Volatile
•       Control Traffic – Market Maker
•       Face Interesting – Known as the first electronic share market

NYSE

•       Market Type – Auction Market
•       Founded – 1792
•       Capitalization Market – $21.3 Trillion
•       Transaction of Locations – New York City, NY
•       Volatility – Stocks Often Less Volatile
•       Control Traffic – Specialist

Auction Market vs. Dealer Market

The formats that NYSE and Nasdaq grasp – auction market and dealer’s market individually – signify the important difference between the way they used to operate. An auction derivative market, which is the route by NYSE, is a system based on sellers and buyers towards the competitive offers at a similar time.

The price is the only thing where the stock rate reflects the peak value that a customer is eager to pay and the lowest price a seller is, therefore, offers accepted. Offers and matching bids are paired mutually with the orders fulfilled by the ‘specialist.’

However, a dealer’s market is a stage by Nasdaq; it is a kind of market where different dealers post rates about prices they will sell or buy a particular stock. A dealer is elected as a market maker in a dealer’s market– a firm, market participant, or members like a brokerage bank or company – that dynamically sells and buys stocks for traders. As a result, the Market Makers can allow matching up sellers and buyers a lot faster, ensuring a well-organized trading process and maintaining liquidity.

Transaction at Different Locations

While both the organizations are established in NY province, the locations of different transactions for trading on Nasdaq and NYSE are unique. NYSE recalls a physical trade floor; many transactions are being done at the center – Mahwah, New Jersey.

Though an electronic exchange, Nasdaq does not have any physical trading floor, and they are operating via direct trade between marketers. In addition, while investors. While Nasdaq trading initially took place over a computer bulletin system, now automatic transaction systems provide the advantage of full reports and daily trading volumes on trades.

Traffic Control

Traffic regulators, sellers, and connect buyers, in essence, but they have different roles between NYSE and Nasdaq. They are answerable for dealing with confirming their finance markets track effectively and traffic problems at every exchange. Though Nasdaq’s traffic regulators, is also identified by the ‘market creators,’ actively sells and buys stocks for customers however the NYSE’s movements regulators, is known as the ‘specialist,’ accelerates the finance market for sellers and buyers via selecting the opening rate of the stocks, moderating interest, and limited orders for specific stocks.

On paper, the two rules are dissimilar in that Nasdaq’s finance market maker efficiently makes a finance market, while NYSE’s professional Again, though files it. Again, both tasks have the similar goal of allowing an orderly and smooth market for customers.

It is worth noticing that roughly 40% of the quantity operated by the Nasdaq is completed via an Electronic Communication Network (ECN), which is a known automated system for straight matching sellers and buyers. On NYSE, just 7% of the quantity is done through ECN, but that can be changed with developing a hybrid system of machines and humans.

Different Types of Listed Companies

When we talk about listings on NYSE and Nasdaq, the NYSE deals with stocks of around 2,800 organizations, while Nasdaq has around 3,300 listings stock.

 The NASDAQ-100 structures 100’s major openly traded organizations based on the finance market, but Nasdaq’s extensive trade structure includes many micro-capitalization and small stocks.

Requirements of Listings

Listing necessities that differ between NYSE and Nasdaq. Nasdaq listing necessities mean that organizations should have around 1,250,000 stocks feasible for the community to market, while businesses registered on NYSE should have allotted at least 1,100,000 to around 400 stockholders. Other variances like fees; for businesses wheeling to register on NYSE and the entrance fee drives up to $500,000; and for Nasdaq, the entry price starts from $75,000 to $50,000, a yearly price of $27,000.

Additionally, the minimum stock price of $4 for NYSE-registered organizations and the finance market price of the business public stock must be around $40 million.* For those registered on Nasdaq, organizations should have at least three traders for their stock equity.

Stocks Preparation

The common insight of the share that differs between NYSE and Nasdaq is the more volatile trade originates on Nasdaq. This happens because long-reputable, stable organizations are more frequently established on the NYSE, such as Citigroup, Coca-Cola, Walmart, and IBM. The Nasdaq has more reputed listings like quick-growth tech companies with more possibility for dramatic rates. Share to be established on Nasdaq such as Apple, Facebook, Amazon, and Google.

Public & Private

The ownership structure of every trader is utilized to be different from how it is today. Previously, Nasdaq was registered as a publicly operated company, while NYSE was a private organization. In March 2006, the NYSE was listed as public, preparing its shares feasible to dealers on a trade. Traders can bet on NYSE and Nasdaq via the NYSE and Nasdaq stages, respectively.

How Can Dealers Utilize the Difference between NYSE and Nasdaq To Their Benefits?

In the given summary, you can select the stock markets to go as a trader; you need to take care of the following steps:

•       Volatility: If you are searching stock with the ability for quick price actions, you may search for it more often on Nasdaq. NYSE provides stocks that are usually more stable and established.
•       Nature of stock trading: If you need to trade via floor brokers, NYSE will give you this option, while Nasdaq provides electronic trading. Features offered by both can be operated via ECNs, derivatives, and third parties.

In our previous articles, we wrote about Dow Jones, S&P500, and Nasdaq.  Let us define indices.

What is Dow Jones?

Dow Jones or Dow or DIJA represents a stock index of 30 blue-chip industrial and financial companies in the United States. The Dow Jones index is price-weighted and does not account for changes in market capitalization. Dow Jones & Co. was founded in 1882 by Charles Dow, Edward Jones, and Charles Bergstresser.

What is Dow Jones today?

What is Nasdaq?

Nasdaq or National Association of Securities Dealers Automated represents an electronic exchange for buying and selling securities managed by Financial Industry Regulatory Authority (FINRA). The Nasdaq Composite is a stock market capitalization-weighted index that consists of the stocks that are listed on the Nasdaq stock exchange.

What’s the difference between the Dow Jones and the Nasdaq?

Dow Jones Industrial Average consists of 30 major companies traded on the NYSE, while the NASDAQ index has more than 3000 companies. Dow index is based on average price calculation where the stock split is not considered. In contrast, NASDAQ is based on the average Market capitalization (Price * Outstanding shares) of the companies index. The NASDAQ stock market depends largely on the technology sector’s performance, while Dow’s performance is focused on the 30 major companies as a group and not as individual stocks.

What is S&P 500?

The Standard & Poor’s 500 or S&P 500 or S&P or SPX represents a weighted stock market index comprising the 500 largest companies by market capitalization listed on the New York Stock Exchange (NYSE) Nasdaq. Founded in 1957, S&P 500 represents the strength of the US economy.

S&P 500 chart and current price

Difference Between Dow Jones S&P 500 and Nasdaq

The difference between dow Nasdaq and S&P is:

• S&P 500  index comprises 500 largest companies by market capitalization listed on the New York Stock Exchange (NYSE) Nasdaq. Dow Jones Industrial Average consists of 30 major companies traded on the NYSE, while the NASDAQ index has more than 3000 companies.
• S&P 500  index is created based on market capitalization, while the Dow index is based on average price calculation where the stock split is not considered. In contrast, NASDAQ is based on the average Market capitalization (Price * Outstanding shares) of the companies index.

Three significant indexes are most renowned because of their extensive usage by the U.S market traders, namely the Dow Jones Industrial Average, Nasdaq 100, and S&P 500. All these three indices are almost similar because they track the impact of the same business cycle and macroeconomic factors on different companies. There also happens to be a crossover between the stock which is a part of all three of these indices. However, other than a few similarities, there are also significant difference=ces between the Dow Jones Industrial Average, Nasdaq 100, and S&P 500, which includes how the index values are computed in each of them and the number and type of stock they constitute. One way to understand the difference among these indices is to learn how they are all calculated. 

Dow Jones Industrial Average, Nasdaq 100, and S&P 500:

Let us learn how to calculate these indices step by step: 

Dow Jones Industrial Average: Also known as Dow, Dow Jones Industrial Averagex in play since 1896, making it very well known globally. As given by the Wall Street Journal, 30 large caps are constituted by the Dow Jones. Under this index, the weighting of every component happens to rank based on share price, followed by a divisor being used for creating the final value. 

Nasdaq 100: Nasdaq 100 is the newest of all these three indices, which started in 1985. Also referred to as the technology index on account of heavy weighting provided to tech-based companies, Nasdaq 100 stands for the biggest non-financial companies on the Nasdaq exchange list. The major determiner under this index is the market capitalization of its constituents. 

S&P 500: Originated by the Standard & Poor’s back in 1962, this indicator accounts for the broadest measure present in the U.S economy among all the three indices. The process of the computing index value is to weigh every company as per the market capitalization followed by the final value being produced based on the divisor set up by S&P. 

Having understood the difference in calculation of the three indices, we can now go ahead to study the trading difference between the three. 

Even though all these indexes share similar characteristics, there happens to be a significant difference in how they trade based on the construction of each index and the importance held by varied companies and sectors. To understand this better, we can take the example of S&P, which is hardly affected by the index since it comprises so many companies against other indices, which might entirely depend on the indexes. 

Over a different period, we have constantly witnessed the varying performances of different sectors. As an example, let us consider how the oil sector occupied a major stake in the 1970s which shifted to the technology sector in the 2000s, Financials till 2008, and finally has been taken over by the information Technology sector in the present times. 

On the other hand, the indices Dow experiences a significant change based on individual stock performance since it constitutes only 30 stocks. Almost 50% of Dow’s value is constituted by the top 10 stocks, which points how it can significantly impact the index if there happens to be any fluctuation in prices. 

Moving on to the Nasdaq 100, we can on=bserve that even though it is broader than Dow, considering the number of constituents, it can still have a grave impact based on a small group of stocks. Almost 50% of the index of Nasdaq 100 is constituted by the top 10 stocks, which leave 90% considerable for lower than half of the index value. Therefore, even small alterations in a few stocks can major impact the index. 

The best time to observe the disparity among the weightings of indices is at the time of earning seasons since that is the time when there are major price swings on account of the companies putting forth their results. 

Lastly,  we would like to throw some light on the basic differences between all three indices regarding the breakdown of weightings. 

The Distinction Between Dow Jones, Nasdaq, and S&P 500 Based on the Breakdown of Weightings

The distinction in volatility: Of all the three indices, Dow Jones happens to be the least volatile since it constitutes slower-moving components that include blue-chip companies like Boeing Company, 3M Company, and United Healthcare. While, on the other hand, Nasdaq 100 is the most volatile among the three due to its high concentration of riskier high-growth companies, including Facebook, Amazon, and Google. In the S&P 500, volatility is in the middle of the two. 

Including the different indices to form a trading strategy: Indices can be considered close to assets in the markets. Hence, various tools such as fundamental and technical analysis are used to conclude. The use of these tools varies based on the term of trade. For long-term trade investors, the focus rests mainly on fundamental analysis, while for short and intermediate-term traders, the focus rests on technical analysis. There is a general reading about which the volatility is higher when uncertainty is looming in the market. There is lower volatility when the prices in the market are rising, and it is functioning more predictably. The volatility changes can be tracked by using the CBOE Volatility Index, which is also known as the fear gauge, pointing towards the role of fear in this index. This can also make short-term trading fruitful by providing many opportunities to short-term traders looking for volatility. 

The role of market direction in volatility: Specifically for the day traders and swing traders who consider short-term price fluctuations, exchange hours are another major characteristic distinguishing the indices from other market assets. The exchange hours play a huge role that fixes the exact hours when there are the most liquid to trade every day. The participation, therefore, is very bleak outside of the exchange hours. 

In the world of finance or the stock market, an index is considered synonymous with a stock market indicator. The index is a model that defines and assesses the credibility and functioning of the stock market. Investors use this method to track the performance of assets and groups of companies in a systematic way. In other words, it is a subcategory of the stock market through which stockholders evaluate and track the current price levels with preceding prices to determine and calculate the market performance. The prices of highlighted stocks are weighed against and computed through a standardized process.

The financial market is built with numerous investing opportunities like shares, bonds, forex, ETFs and indexes, and much more. One such instrument is the Russell 3000 list of indexes. Are you also wondering what this index is, what companies are in the Russell 3000 index, etc.? Well, we have got you covered.

What is the Russell 3000 index?

The Russell 3000 Index represents an index comprised of the 3,000 largest U.S.-traded stocks created by FTSE Russell. Russell 3000 market-capitalization-weighted equity index currently represents 98% of the investable U.S. equity market.

The investors can purchase the index fund and participate in the stock market index, categorized as either a mutual friend or an exchange-traded fund. In a nutshell, a stock market index is a determinant or tool to analyze statistical performance and data changes materializing in the stock market. Consequently, a stock index displays and mirrors the market performance and trajectory of price movements of different assets and products in the financial or investment world. Indexes are the lenses of economic and financial perception that discuss and publicly display the marketing fluctuations in the stock market. Whether a company is performing up to the mark or dwindling in terms of financial procurement, all the vital information is accumulated through the concept of an index.

In the Russell 3000 companies list, all the publicly listed companies are given weightage according to their market cap. The index, as said, is a broader one and contains almost 98 percent of all stocks of the U.S share market.

Russell 3000 companies list was first time published in 1984, on 1st January. After that, it is being published every year by considering and adjusting the market capitalization changes. In addition to that, quarterly checks are also in place to see if any new companies are qualified to be included in the Russell 3000 list.

What companies are in the Russell 3000?

Russell 3000 list is presented on the ftserussell.com website. The list is updated, and you can download the Russell 3000 list here. 

It is a financial index that helps track and analyze the performance of the U.S’s top 3000 companies that are traded publicly. The index is created and updated by a data solution & subsidiary institute of the London Stock Exchange Group called FTSE Russell.

Russell 3000 index list of companies include Microsoft, Facebook, Apple, Johnson & Johnson, Berkshire Hathaway, Amazon, Alphabet, and more.

If you compare Russell 3000 vs. S&P 500, the difference would be that Rusell captures the top and largest 3000 companies, whereas S&P 500 caters only to 500. As a result, in the S&P 500 vs. Russell 3000, Russell is said to be a broader index.

As we have described, the Russell index contains 98 percent of the total stocks listed on the U.S market, which are given weight according to their market cap. Looking at numbers, as of 31st March 2020, the market cap of Russell 3000 companies was around $244 billion. Doing the same timeframe, the top largest stock ruling the index with a whopping market capitalization of $1.2 trillion was Microsoft.

Russell 3000 index fund price

Current Russell 3000 returns are:

Live Russell 3000 chart is presented below:

What is the Russell 3000 Growth index?

Russell 3000 growth index represents a subset of the Russell 3000 index that includes companies displaying above-average growth signs. This market capitalization-weighted index is derived from Russell 3000 index and covers both large-cap and small-cap companies.

Investors and financial analysts use the concept of indexes to compare, contrast and evaluate the average weight of selected stocks and list them against different investments and assets. Investors are granted constructive investments to the stock market and financial capitalization as they use indexes. The Russell 3000 index is defined as a capitalization-oriented stock market index that FTSE Russell regulates. Russell 3000 index is the financial threshold and renowned index form for the entire US stock market. It includes 3000 assets and financial companies operating on a public scale in the United States of America. These companies display market capitalization and exhibit more than 98% of the American public equity market. Russell 3000 index was made accessible on January 1, 1984, and is currently maintained by FTSE Russell, a non-subsidiary of the London stock exchange club.

The top 10 holdings for Russell 3000 list include Apple, Microsoft car, Amazon, Facebook, Tesla, Alphabet Inc., Johnson and Johnson, Berkshire Hathaway, and JP Morgan Chase and Co. The categories evaluated by Russell 3000 index incorporates technology, consumer discretionary, industrial items, financial domains, healthcare services, real state facilities, telecommunication services, energy providers, and basic materials.

To understand the philosophy of the Russell 3000 index, the fundamental purpose and mission need to be evaluated first. It is the blueprint for more than the 3000 largest US-traded stocks. It serves as a foundation for various financial items and possessions, incorporating the Russell 1000 and Russell 2000 index. The thousand US-traded stocks are index interest of 3000 which further constitute Russell 1000, whereas Russell 2000 is a small-scale category or subset of 2000 components. Most American mutual and exchange funds take on a defensive role when the markets are full and glorified. However, Russell 3000 appears within the standard onset, does not take on a defensive role, and has a completely passive strategy. The available stocks within the rest of 3000 Index Corporation are re-handled on an annual basis especially on the last Friday of June. By this time, the flourishing companies and companies that experience loss is displayed in the index’s overall availability and are marked according to their current market portfolio and capitalization. The number of securities is expected to fluctuate on an annual basis. If the securities are modified, they will likely replace it at the preceding reconstitution scheduled for next year. The fluctuation occurs due to market performance, such as mergers, acquisitions, and private dealerships.

Russell 3000 vs. S&P 500

The difference between S&P 500 and Russell 3000 are:

1. Russell has 3000 stocks while S&P 500 only 500 stocks
2. S&P 500 has large-cap stocks while Russell 3000 has 1000 large and 2000 small-cap stocks.
3. Russell 3000 companies are selected based solely on market capitalization
4. Russell 3000 is the potentially high cost (many updates) for an investor to replicate this index.

Russell 3000 index is known to accommodate and welcome an assorted range of large-scale, mid-level, and small-cap stocks. As a result, most of the investors are attracted to investing in Russell 3000. most of the investors often overlooked the reality that scale companies rarely garner the returns and annual revenue. In contrast, the revenue gathered by the small or mid-level companies is mostly ignored. Because of this reason, the end cycle of the Russell 3000 displays a high correlation with the S&P 500 and only affects a particular portion by exhibiting its partial revenue and return. Investing in multiple funds and catering categories of all types, such as securities, technology, income instruments, and domestic stocks, will allow a portfolio to be extremely diverse.

The Russell US index incorporates large-scale microcap firms and is a pioneer in establishing benchmarks for institutional investors. Since it is known for its diversification and inculcation of many varied holdings, Russell 3000 is preferred over Wilshire 5000. The process of Russell 3000’s operation includes liquid stocks which are invested in the United States. This is a complete US-based investing concept and accommodated US-oriented firms and discourages the admittance of international firms. More than 98% of the total revenue of equity is treated and invested on US exchange, making this an extensive index.

Apart from analyzing the performance of companies, indexes are also used to measure and determine financial tools, economic insights, and data such as interest rates, inflation percentages, or manufacturing output. Regardless of their consumption, indexes are financial standards used to comprehend the portfolio’s return and performance in stock markets. Indexing is a popular investment strategy that acts similarly to an index passively rather than outperforming it.

There are around more than 5000 indexes. Some of the other renowned and recognized indexes include the Dow Jones industrial average, Nasdaq, Wilshire 5000, and Morgan Stanley Capital international. Among them, Wilshire 500 is the US-based stock which includes stocks from the US market solely. The US stock market has a wide variety of indexes that can be utilized through different methodologies and sub categorizations to fulfill different financial purposes. However, the media is responsible for exhibiting the performance of top-tiered indexes, which are carrying out performance-based indications regularly. Investors use indexes to understand performance proxies and allocation guides. Passive index investing is mostly carried out through exchange-traded funds that track the performance of specific funds.

We can say that trading in the Russell 3000 list is like trading in the ocean; you get plenty of opportunities to catch a fish. You get to do your own analysis, and the probability is always high that you find what you are looking for. Compared to Dow Jones Industrial Average (DJIA) and Nasdaq, Russell 3000 does provide a wider perspective and representation of the U.S equity market.

What is S&P 500?

The Standard & Poor’s 500 or S&P 500 or S&P or SPX represents a weighted stock market index comprising the 500 largest companies by market capitalization listed on the New York Stock Exchange (NYSE) Nasdaq. Founded in 1957, S&P 500 represents the strength of the US economy.

It is often used as an indicator for business cycles.

How to Trade S&P 500?

To trade S&P 500, please follow these practical rules:

• Before you enter any trade, analyze the current market and define the take-profit price level and stop-loss price level before making any investment.
• Be careful to enter into trades during the recession and high US inflation.
• Short-time predictions for indices have low accuracy, and it is hard to trade an S&P 500-day trader.
• Avoid long-term buy investments for S&P 500 if Shiller PE Ratio or price-earnings ratio, based on average inflation-adjusted earnings from the previous 10 years, is too high.
• You should limit your exposure and manage your risk. It is advised not to let your exposure rise more than 5%.
• Never trade without stop-loss!
• Keep your emotions aside while trading.
• Economic data is known to stir the market and create volatility. Keep your head in the game whenever high-impact data is released.
• Keep a record of your trades. Journal all your trades. It will make you more confident, and you will analyze your trades in a better light. Review this journal every week to figure out how your decisions impact your profit and losses.

S&P 500 chart and current price

S&P 500 Trade Benefits

There are many reasons why you should trade S&P 500, the most prominent being getting exposure to the US market while diversifying the portfolio. Both long-term and short-term traders can benefit from it.

Some other benefits are as follows:

• The technical chart patterns are depicted clearly. This makes finding prominent entry and exit points very easy.
• The spreads are tight, which means that trading costs will be on the lower side.
• Like mutual funds, the S&P is also covered by experienced analysts. They continuously conduct comprehensive fundamental and technical analyses on the market.
• You get more flexibility in terms of time as the S&P trades almost 24/5.

Guidelines for Finding the Right S&P 500 Trading Strategy

When it comes to trading, irrespective of the asset you are interested in, curating a good strategy is necessary. You can start with limited capital, but you can easily make it big if your strategy is good. This holds specifically true in SPX trading. 

While you are free to design your own trading path, here are some common guidelines and principles that most successful traders swear by:

If your trading strategy is effective, you will focus better as it will filter the market noise. It will enable you to trade with increased focus and find beneficial entry and exit points.

Your strategy will predetermine your levels of exit, entry, and trade size. Even before you enter the trade, you must have a clear idea about how much you will be risking and what you will be gaining.

One must never trade when high on emotions. Your strategy will enable you to compartmentalize better. You will have a defined guideline regarding risk management, leverages, and points of entry and exit.

The Trading Hours

The market for S&P operates almost 24/5. The main market houses, or the time that most professional traders prefer, are between 9:30 AM to 4:00 PM EST. The main reason why these hours are considered more suitable for trading is that, as a trader, you will get more liquidity and tighter spreads. 

Once you have an idea about the operational market hours and the principles you should consider while making your strategy, the next and the most important step is to create that profitable strategy. You can choose between fundamental and technical analysis as your basis for creating a good trading strategy. Many experienced traders factor both while devising their strategies.

Using Technical and Fundamental Analysis for S&P 500 Trading

First, let’s figure out what these techniques individually stand for.

• Fundamental Analysis for S&P 500

In general, we consider the economic data as fundamentals. This economic data can be fetched from the economic calendars that different companies and government bodies release. Types of economic data that can move the S&P are given below:

• The Consumer Price Index (CPI)
• Employment Ratio
• Gross Domestic Product (GDP)
• Interest Rates

This data is used to identify the changes required to be made to the Federal Reserve Bank’s interest rates to stabilize the economy. If the economy is overheating and the inflation is on a higher side, the bank will increase the interest rate to combat the situation. These increased interest rates fetch higher yields on government bonds. This encourages investors to move towards bonds from equities to increase their income and decrease the capital risk.

This movement can decrease the S&P prices as the market is now witnessing increased selling pressure. When making your strategy, it is essential to consider all the fundamentals that we have stated. The idea behind this is elementary – the underlying trend will always reflect the US economy.

• Technical Analysis for S&P 500

There are many technical indicators that you can employ while formulating your strategy using technical indicators. Please use them in combination. Generally, traders use price action, support and resistance levels, oscillators, triangle price patterns, moving averages, and Ichimoku in different combinations. These are the most preferred ones, but the list is not limited to these indicators. 

The idea here is to chase a trend. Most traders want to increase their accuracy and profit by following the ongoing trend to find out buy-signals. For example, let’s assume that the S& P has been going in an upward movement. In this case, the traders will prefer to buy at support levels. Similarly, if the S& P has been going in a downward movement, the traders will prefer to sell at resistance levels.

It is important to be certain when you are looking for entries using technical indicators. Therefore, many traders will use the Relative Strength Index to ensure that these entry signals are fine-tuned. 

We have already asserted that there are many technical indicators out there that will fit different strategies differently. There are, however, some time-tested indicators. Such as:

• The Relative Strength Index or the RSI.
• The Stochastic Oscillator or the Stoch
• The Moving Average Convergence Divergence or the MACD

These are some popular oscillators. Some favorite patterns are listed below:

• Head and Shoulders
• Triangles
• Bull/Bear Flags

Before deciding whether you want to base your S&P strategy on fundamental analyses or technical analyses, we would encourage you to understand how the two work. It is important to know such technicalities before you start trading. There is no rule that you have to choose one of the two. In fact, most successful traders used both ways to create a profitable strategy.

Different Holding Periods for S&P Trading

The holding time period completely depends on the traders and their strategies. Here are some time-tested holding periods. You can choose the one that suits your trading personality.

Day Trading or Scalping: As the name suggests, the entire trade culminates within 24 hours. Here, the traders try to capitalize on the smallest price moves using short time frames. This is done with the help of the price action tool. S& P attracts day traders because it operates almost 24/5 and offers high liquidity and tighter spreads.

Intra-day: Traders that follow this time period are generally looking for short-term trades, that is, trades that do not last for more than a couple of days. Traders use technical analysis for intra-day trading mainly because SP500 has clear daily momentum moves and technical patterns. Some traders also use trading news events and fundamental analysis as well. 

Swing Trading: The timeline of swing trading is for a few days to a couple of weeks. Unlike day trading and intra-day trading, swing traders look for medium-term moves. Swing traders formulate their strategies using both fundamental and technical analysis. While swing traders make fewer trades, they prefer higher risk-reward trades.

Can you day trade the S&P 500?
Yes, many corporations, prop companies, and retail traders trade S&P 500 using day trading strategies. Usually, they open trades after the opening range (30 minutes or 1 hour after markets open) and enter into trades based on technical analysis patterns, fundamental research. However, most traders keep trades for at least a few days or in the long term several weeks, months because of better trading accuracy.
Some trades traders trade S&P 500 gaps and various day trading strategies too.

What is Dow Jones?

Dow Jones or Dow or DIJA represents a stock index of 30 blue-chip industrial and financial companies in the United States. The Dow Jones index is price-weighted and does not account for changes in market capitalization. Dow Jones & Co. was founded in 1882 by Charles Dow, Edward Jones, and Charles Bergstresser.

What is Dow Jones today?

In the real-time chart below, let us see how much is the dow jones right now and Dow Jones change today:

It would be pertinent to mention here that Dow Jones has been christened in commemoration of C. Dow. He gave birth to this index way back in 1896 with Edward Jones, his business partner.

Why is it called Dow Jones? Dow Jones index got its name based on two founders Charles Dow and Edward Jones (Dow + Jones).

There are a few things unique about DJIA. It stands second as far as the age of stock indexes is concerned. The first one being DJTA. The main objective of DJIA was to be a barometer of the economy of this country from a broader perspective. If you are looking for a benchmark index for the USA’s best stocks, there are reasons to believe it is the best. It is an index based on price weightage, and as mentioned earlier, it tracks the best and widely traded shares.

There is no doubt that this an overall index in the USA and across the world. All the firms that make up the DJIA can easily be classified as top-notch companies. They boast of stable earnings, consistently and continuously. Some big names that are part of DJIA are Microsoft Corporation and many other such big words.
The DJIA has traveled quite a distance since it began its journey. When it started, DJIA had only two companies. Most of these 12 companies were from various sectors covering sugar, gas, cotton, railroads, tobacco, sugar, etc. It also would be interesting to mention here that the economy was almost totally dependent on major industrial companies’ growth in the early part of the last century, as discussed above. Even today, a strong Dow is seen as a reflection of a strong U.S economy. However, the index composition changed with time. There are many instances where a company has been taken off from the DJIA list and replaced with a new, purely based on merit and performance. Suppose a company ends up losing a significant portion of its market capitalization because of various reasons. In that case, it gets replaced by a new company that has the credentials and money to replace the outgoing company.

Dow Jones Chart 10 Years

Below is presented Dow Jones 10 years chart:

Dow Jones U.S. Small-Cap Total Stock Market Index

Below is presented last 10 years’ chart of the Dow Jones small-cap index. Dow Jones adjusted for inflation index showed interesting return. Dow Jones average annual return last 10 years was 10.43% for small caps (annualized for inflation).

Dow Jones historical chart – Dow Jones 100 year chart

Below is presented closing price of the Dow Jones industrial average for the last 100 years:

Dow jones historical prices by year – Dow Jones industrial average historical annual data

This Dow Jones graph above presents historical closing prices for the Dow index from 1915 till 2021. The first increase in price Dow had in 1980. Dow Jones 1980 till 2000. increased up to $10000.   If we analyze the Dow Jones industrial average’s closing price, we can see the rapid gain in the last 10 years. Dow Jones’s 100-year chart showed that in 2007 Dow’s industrial average price was $12050 while in 2009 went down to $6547. So in just two years, Dow’s price has halved. After that, from $6547 in just 12 years, the Dow price has risen above $3000.

Dow returns by year – Dow Jones historical prices by year from 1915

What is the average return for Dow Jones?

Below is the calculated average return for the Dow index from 2011-2021, 2001-2021, and 1991-2021.

What is Dow Jones’s average return for the last 10 years?

• The total Dow Jones Industrial Average Return for the last 10 years adjusted for inflation is 122.010%.
• Annualized Dow Jones Industrial Average Return for the last 10 years adjusted for inflation is 8.302%.
• Total DJIA Return (Dividends Reinvested) for the last 10 years adjusted for inflation is 180.419%.
• Annualized DJIA Return (Dividends Reinvested) for the last 10 years adjusted for inflation is 10.862%

What is Dow Jones’s average return last 20 years?

• The total Dow Jones Industrial Average Return for the last 20 years adjusted for inflation is 109.782%.
• Annualized Dow Jones Industrial Average Return for the last 20 years adjusted for inflation is 3.774%.
• Total DJIA Return (Dividends Reinvested) for the last 20 years adjusted for inflation is 238.185%.
• Annualized DJIA Return (Dividends Reinvested) for the last 20 years adjusted for inflation is 6.282%

What is Dow Jones’s average return last 30 years?

• The total Dow Jones Industrial Average Return for the last 30 years adjusted for inflation is 454.899%.
• Annualized Dow Jones Industrial Average Return for the last 30 years adjusted for inflation is 5.878%.
• Total DJIA Return (Dividends Reinvested) for the last 30 years adjusted for inflation is 1027.519%.
• Annualized DJIA Return (Dividends Reinvested) for the last 30 years adjusted for inflation is 8.410%

Dow Jones historical data in Excel

Please download Dow Jones history 10 years data
Please download Dow Jones 100 years historical data

Dow Jones market capitalization

Market capitalization or market cap is the total market value of the company’s outstanding shares. To calculate a company’s market capitalization, you need to multiply the current stock price by the total number of shares. Dow Jones market capitalization in 2020 was around 8.94 trillion dollars.

Stocks having better value are the ones that carry greater weight as far as the overall index is concerned. Earlier, the average was calculated by dividing the price of 12 stocks after summing up the stock prices on a particular day. This has gone through many changes over time, and it may have happened because of many reasons. Stock splits, mergers and acquisitions may have led to these changes over time.

Dow Jones components

Dow Jones components represent 30 stocks that are price-weighted. The Dow 30 or DIJA index is calculated using a divisor to normalize the index components.

Dow Jones components are the following 30 companies:

The index has to be often re-valued to accommodate new entrants and, after taking into account, firms or companies that may have been forced to move out for various reasons. The number of companies moved to 30 way back in 1928. However, what is pertinent to mention here is that the Dow Index composition has changed around 60 times since 1928. The first change happened about three months after the component index of 30 was created. The Great Depression saw many changes to its overall components. One of the most significant changes perhaps happened in 1932, when eight out of thirty stocks in the DOW had to be replaced.

There have been many changes to the composition of the Dow over the past 125 years or so. One of the most significant changes happened in 1997 when Bethlehem Steel, Texaco, Woolworths, and Westinghouse Electric were replaced by Johnson & Johnson, Hewlett-Packard, and Travelers Group Wal-Mart.

In 1999 some more changes happened when Union Carbide, Chevron, Sears Roebuck, and Goodyear Tire were shown the door, and in their places, Intel, Home Depot, SBC Communications, and Microsoft were added. Many other changes to the composition of the 30 happened in 2018 and 2020. Therefore, such changes are part and parcel of the journey of DJIA, and most certainly, many more changes to the composition will happen over the years.

What are 30 stocks in the Dow Jones?

Dow Jones companies list is:

• 3M Company
• American Express
• Amgen
• Apple Inc.
• Boeing
• Caterpillar Inc.
• Chevron Corporation
• Cisco Systems
• Dow Inc.
• Goldman Sachs
• Honeywell
• IBM
• Intel
• Johnson & Johnson
• JPMorgan Chase
• McDonald’s
• Merck & Co.
• Microsoft
• Nike
• Procter & Gamble
• Salesforce
• The Coca-Cola Company
• The Home Depot
• The Travelers Companies
• The Walt Disney Company
• UnitedHealth Group
• Verizon
• Visa Inc.
• Walgreens Boots Alliance
• Walmart

How is the Dow Jones calculated?

Dow Jones index value represents the sum of all 30 stocks’ prices divided by a Dow divisor. Dow Jones index calculation is based on price-averaged calculation and determining Dow divisor. The Dow divisor is a figure used to normalize the Dow Jones Industrial Average value, and it is regularly updated to ensure that structural changes to the market.

Over a while, a new concept known as Dow Divisor was used as a constant for calculating the DJIA index. The constant was predetermined and helped determine the impact of a single point move as far as the 30 stocks are concerned. However, there are situations and times where the divisor had to be changed to ensure that the overall value of the DOW remained consistent. The divisor, of course, keeps change, and you find it out by referring to various sources of information. The WSJ or the Wall Street Journal gives the interested stakeholders the latest divisor.

Not many people may know that the DOW index is not calculated using the WAA or the Weighted Arithmetic Average. Therefore it may not be an accurate reflection of the overall market capitalization of the various components of DJIA. However, this is not the case with other indexes like S&P 500 and others. The Dow Index is the total share of stocks’ price movement as far as all the components are concerned after being divided by the divisor number mentioned above. In a practical situation, if there is a single point movement in any single stocks that make up the 30 total numbers, this will move the index by the same number of points.

Is Amazon in Dow Jones?

No, Amazon company is not in the Dow Jones index. Amazon needs to split its shares by 10-to-1 or more to reduce them to a level at which Dow Jones can consider this company. Dow index can not accept share that is more than $3000 such as Amazon. Amazon didn’t split its stock since 1999. This is the biggest problem for the Dow Jones index because some big and excellent companies are not listed. In 2020, the Dow rose just 7.3%, while the Nasdaq gained 24%, and the S&P 16%.

What’s the difference between the Dow Jones and the NASDAQ?
Dow Jones Industrial Average consists of 30 major companies traded on the NYSE, while the NASDAQ index has more than 3000 companies. Dow index is based on average price calculation where the stock split is not considered. In contrast, NASDAQ is based on the average Market capitalization (Price * Outstanding shares) of the companies index. The NASDAQ stock market depends largely on the technology sector’s performance, while Dow’s performance is focused on the 30 major companies as a group and not as individual stocks.

Conclusion

To conclude, some critics strongly believe that a stocks’ price may not be the right way to reflect a company’s overall performance that belongs to the list of the 30. Market cap is perhaps a more accurate way of looking at the strength and possible weaknesses of companies.